Article excerpt

An NBER-Universities Research Conference on the Impact of Recent State and Federal Reforms in Public Assistance and Social Insurance Programs took place in Cambridge on May 14 and 15. Organizers Hilary W. Hoynes, NBER and University of California, Berkeley, and Jonathan S. Skinner, NBER and Dartmouth College, chose the following papers for discussion:

S. Rao Aiyagari, Jeremy Greenwood, and Nezih Guner, University of Rochester, "On the State of the Union"

No Discussant

Steven Raphael and Lorien Rice, University of California, San Diego, "Car Ownership, Employment, and Earnings"

Discussant: Susanna Loeb, University of California, Davis

Jane Millar and Marianne Page, University of California, Davis, and Joanne Spetz, Public Policy Institute of California, "Does the Minimum Wage Affect Caseloads?"

Discussant: David T. Ellwood, NBER and Harvard University

John Ham and Lara Shore-Sheppard, University of Pittsburgh, "The Impact of Public Health Insurance on Labor Market Transitions"

Discussant: Wei-Yin Hu, University of California, Los Angeles

Using several sources of exogenous increases in public medical spending, Baicker estimates that the entire state portion of the burden of federally mandated spending is borne by decreases in other spending on public welfare programs. These reductions are attributable in part to the substitutability of programs in the voters' minds, but also in large part to the "stickiness" of government spending by budget category. States with greater racial differences between benefit recipients and voters, and states with less generous neighbors, reduce other spending on public welfare by even more, thus alleviating the burden that medical expansions impose on their taxpayers. There is no evidence that the existence of self-imposed tax and expenditure limits affects state reactions to these mandated shocks, though.

In federal systems, social expenditure often is funded by matching grants. Estimates of the effect of different matching rates on expenditures by subnational governments vary widely because of the inherent difficulties in identifying price and income effects of federal grants given the structure of the funding mechanisms in most countries. Baker, Payne, and Smart examine a recent reform in Canada, in which federal grants for welfare expenditures were "capped" (converted from an open-ended to a closed-ended matching grant); the cap applied to only three of ten provincial governments. They find that the affected provinces responded to the reform by reducing the growth rate of expenditures over the medium term: it was 8 to 9 percentage points lower than predicted in the absence of the cap. …